Contractor tax calculator 2026/27

Contractor tax calculator 2026/27: what it covers

This calculator lays out the full tax picture for a contractor operating through a limited company, rather than just the final take-home number. Contract income becomes turnover; you deduct allowable expenses to reach taxable profit; the company pays corporation tax on that profit (19% to £50,000, 25% over £250,000, marginal relief between). Only then is profit distributed, so the calculation stacks four separate charges: corporation tax, dividend tax, and National Insurance on any salary.

On a director's salary the company pays employer NI at 15% above £5,000, and you pay employee NI at 8% between £12,570 and £50,270 then 2%. Because single-director companies generally cannot claim the £10,500 Employment Allowance, the employer NI on a £12,570 salary is a real (though corporation-tax-deductible) cost. Dividends, drawn from post-corporation-tax profit, carry no NI but are taxed at 10.75%, 35.75% and 39.35% after the £500 allowance.

Allowable expenses reduce profit before all of this: accountancy fees, business travel and subsistence, equipment and software, use-of-home, professional indemnity insurance, and employer pension contributions. Getting expenses right lowers the corporation tax layer directly. Figures here are estimates for planning, not tax advice.

A £500-a-day contract, outside IR35

Start from the day rate and work down. A contractor billing £500 a day for 44 weeks, with £10,000 of allowable expenses, arrives at £100,000 of profit — then the four tax layers apply:

This assumes the contract sits outside IR35, where the salary-plus-dividend route applies. If the engagement is inside IR35, the fee is taxed largely as employment income through PAYE with employee and employer NI, the dividend efficiency disappears, and much of this calculation no longer applies — so settle each contract's IR35 status first.

Which taxes a contractor's company pays, and when

1. VAT: once turnover passes £90,000 in a rolling 12 months the company must register and charge VAT on top of the day rate. VAT is collected for HMRC and is not income.⁵
2. PAYE on the director's salary: reported each payday and paid monthly. On a £12,570 salary that is employer NI only.⁶
3. Corporation Tax on profit after expenses and salary, due nine months and a day after the company's year end.¹
4. Dividend tax on what you take out, paid through Self Assessment by 31 January after the tax year.²
5. All of this assumes the contract is outside IR35. Inside IR35 the fee is taxed much like employment income and most of this breakdown does not apply.³

Where £450 a day goes

220 billed days, £5,000 of expenses (insurance, accountant, equipment, travel), a £12,570 salary and all remaining profit as dividends.

Corporation Tax is the biggest single charge, and it is a company liability: it has to be paid whether or not you take the money out.

How the tax share rises with the day rate

Same 220 days and £5,000 of expenses at three day rates, all profit extracted.

The share rises because higher profit moves the company into marginal relief and pushes more dividends over £50,270 into the 35.75% band.

A contractor's tax calendar

For a company with a 31 March 2027 year end and a director paid monthly:

Corporation Tax and dividend tax for the same year fall within a month of each other. Keep both in a separate savings account as you go.

Contractor tax mistakes

Contractor tax calculator 2026/27 — FAQs

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A limited company must keep its finances separate from personal accounts. These accounts are free to open.